1. (TCO A) Below you will find selected information (in millions) from Coca-Cola Co.’s 2012 Annual Report:
Income Taxes Payable
$471
Short-term Investments and Marketable Securities
8,109
Cash
8,442
Other non-current Liabilities
10,449
Common Stock
1,760
Receivables
4,812
Other Current Assets
2,973
Long-term Investments
10,448
Other Non-current Assets
3,585
Property, Plant and Equipment
23,486
Trademarks
6,527
Other Intangible Assets
20,810
Allowance for Doubtful Accounts
53
Accumulated Depreciation
9,010
Accounts Payable
8,680
Short Term Notes Payable
17,874
Prepaid Expenses
2,781
Other Current Liabilities
796
Long-Term Liabilities
14,736
Paid-in-Capital in Excess of Par Value
11,379
Retained Earnings
55,038
Inventories
3,264
Treasury Stock
35,009
Other information taken from the Annual Report:
Sales Revenue for 2012
$48,017
Cost of Goods Sold for 2012
19,053
Net Income for 2012
9,019
Inventory Balance on 12/31/11
3,092
Net Accounts Receivable Balance on 12/31/11
4,920
Total Assets on 12/31/11
79,974
Equity Balance on 12/31/11
31,921
Required:
1. Using the information provided prepare a Balance Sheet. Separate the current assets from non-current assets and provide a total for each. Also separate the current liabilities from the non-current liabilities and provide a total for each.
2. Using the Balance Sheet from your answer above calculate; Current Ratio, Days in Inventory, Average Collection Period, Return on Assets Ratio, Debt to Total Assets and Return on common stockholders’ equity ratio. (Make sure to show all your work)
(Points : 36)
2.(TCO B) The following selected data was retrieved from the Wal-Mart, Inc. financial statements for the year ending January 31, 2013:
Accounts Payable
$38,080
Accounts Receivable
6,768
Cash
7,781
Common Stock
3,952
Cost of Goods Sold
352,488
Income Tax Expense
7,981
Interest Expenses
2,064
Membership Revenues
3,048
Net Sales
466,114
Operating, Selling and Administrative Expenses
88,873
Retained Earnings
72,978
Required:
Using the information provided above:
1. Prepare a multiple-step income statement
2. Calculate the Profit Margin, and Gross profit rate for the company. Be sure to provide the formula you are using, show your calculations, and discuss your findings/results.
(Points : 36)
3. (TCO C) Please review the following real-world Hewlett Packard Statement of Cash flows and address the 2 questions below:
Cash flow from operating activities
In millions
In millions
For the year ended 2012
For the year ended 2011
Net (loss) earnings
$(12,650)
$7,074
Depreciation and amortization
5,095
4,984
Impairment of goodwill and purchased intangible assets
18,035
885
Stock-based compensation expense
635
685
Provision for doubtful accounts
142
81
Provision for inventory
277
217
Restructuring charges
2,266
645
Deferred taxes on earnings
(711)
166
Excess tax benefit from stock-based competition
(12)
(163)
Other, net
265
(46)
Accounts and financing receivables
1,269
(227)
Inventory
890
(1,252)
Accounts payable
(1,414)
275
Taxes on earnings
(320)
610
Restructuring
(840)
(1,002)
Other assets and liabilities
(2,356)
(293)
Net cash provided by operating activities
10,571
12,639
Cash flows from investing activities:
Investment in property, plant, and equipment
(3,706)
(4,539)
Proceeds from sale of property, plant, and equipment
617
999
Purchases of available-for-sale securities and other investments
(972)
(96)
Maturities and sales of available-for-sale securities and other investment
662
68
Payments in connection with business acquisitions, net of cash acquired
(141)
(10,480)
Proceeds from business divestiture, net
87
89
Net cash used in investing activities
(3,453)
(13,959)
Cash flow from financing activities:
(Payments) issuance of commercial paper and notes payable, net
(2,775)
(1,270)
Issuance of debt
5,154
11,942
Payment of debt
(4,333)
(2,336)
Issuance of common stock under employee stock plans
716
896
Repurchase of common stock
(1,619)
(10,117)
Excess tax benefit from stock-based compensation
12
163
Cash dividends paid
(1,015)
(844)
Net cash used in financing activities
(3,860)
(1,566)
Increase (decrease) in cash and cash equivalents
3,258
(2,886)
Cash and cash equivalents at beginning of period
8,043
10,929
Cash and cash equivalents at end of period
$11,301
$8,043
Required:
1) Please calculate the percentage increase or decrease in cash for the operating, investing, and financing sections and explain the major reasons for the increase or decrease for each of these sections.
2) Please calculate the free cash flow for 2012 and explain the meaning of this ratio.
(Points : 36)
4. (TCO D) You are CFO of Goforit, Inc., a wholesale distribution company specializing in emerging technologies. Your CEO is a brilliant marketer, but relies on you to explain issues and choices in accounting and finance. She has heard from other members of a CEO organization to which she belongs that a company’s net income can vary widely depending on which accounting choices are made from the “GAAP menu.”
Assuming the goal is to maximize net income, choose an accounting treatment from each of the following scenarios, and explain to your CEO why the choice will produce the desired effect on reported Net Income for the current year. Include in your answer the effect of the choice on both the income statement and balance sheet.
Required:
a. Goforit carries significant electronics inventory in a competitive environment where prices are actually falling. Which inventory valuation method would you choose—LIFO, FIFO, or average cost? Assume that unit purchases exceed unit sales.
b. Goforit has a large investment in warehouse equipment including conveyor belts, forklifts, and automated packaging systems. Which depreciation method would you choose: Straight line (SL) or double declining balance (DDB)?
(Points : 36)
5. (TCO F) Please review the following real-world ratios for Johnson & Johnson and Pfizer for the year ended 2012 and address the 2 questions below.
Ratio Name
Johnson & Johnson
Pfizer
Profit margin
16.1%
24.7%
Inventory turnover ratio
3.1
1.7
Average collection period
59.4 days
69.1 days
Cash debt coverage ratio
.27
.16
Debt to Total assets
46.6%
127.5%
Required:
1) Please explain the meaning of each of the Pfizer ratios above.
2) Please state which company performed better for each ratio.
(Points : 36)

QCM
1. (TCO A) An advantage of the corporate form of business is that _____. (Points : 5)
it has limited life
its owner's personal resources are at stake
its ownership is easily transferable via the sale of shares of stock
it is simple to establish
2. (TCO A) The Dividends account _____. (Points : 5)
is increased with a debit
is decreased with a credit
is not an expense account
All of the above
3. (TCOs A, B) Below is a partial list of account balances for Denton Company:
Cash $7,000
Prepaid insurance 700
Accounts receivable 3,500
Accounts payable 2,800
Notes payable 4,200
Common stock 1,400
Dividends 700
Revenues 21,000
Expenses 17,500
What did Denton Company show as total credits? (Points : 5)
$30,100
$29,400
$28,700
$30,800
4. (TCOs B, E) A small and private company may be able to justify using a cash basis of accounting if it has _____. (Points : 5)
sales under $1,000,000
no accountants on staff
insignificant receivables and payables
all sales and purchases on account
5. (TCO D) Two companies report the same cost of goods available for sale, but each employs a different inventory costing method. If the price of goods has increased during the period, then the company using _____. (Points : 5)
LIFO will have the highest ending inventory
FIFO will have the highest cost of goods sold
FIFO will have the highest ending inventory
LIFO will have the lowest cost of goods sold
6. (TCO A, E) Equipment was purchased for $17,000 on January 1, 2006. Freight charges amounted to $700 and there was a cost of $2,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $3,000 salvage value at the end of its 5-year useful life. What is the amount of accumulated depreciation at December 31, 2007, if the straight-line method of depreciation is used? (Points : 5)
$6,680
$3,340
$2,860
$5,720
7. (TCOs D, G) Lopez Corporation issues 500 ten-year, 8%, $1,000 bonds dated January 1, 2007, at 96. The journal entry to record the issuance will show a _____. (Points : 5)
debit to Cash of $500,000
credit to Discount on Bonds Payable for $20,000
credit to Bonds Payable for $480,000
debit to Cash for $480,000
8. (TCO C) Accounts receivable arising from sales to customers amounted to $80,000 and $70,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $240,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows is _____. (Points : 5)
$240,000
$250,000
$310,000
$230,000
9. (TCO F) If you are comparing the 2010 income statement numbers with the income statement numbers from 2009 and 2008, you are conducting a _____. (Points : 5)
common-size analysis
horizontal analysis
vertical analysis
ratio analysis
10. (TCO F) Vertical analysis is also known as _____. (Points : 5)
perpendicular analysis
common-size analysis
trend analysis
straight-line analysis
11. (TCO F) Which one of the following is not a characteristic generally evaluated in ratio analysis? (Points : 5)
Liquidity
Profitability
Marketability of the product
Solvency
12. (TCO F) A common measure of profitability is the _____. (Points : 5)
current ratio
current cash debt coverage ratio
return on common stockholder's equity ratio
debt to total assets
13. (TCO F) Long-term creditors are usually most interested in evaluating _____. (Points : 5)
liquidity
marketability
profitability
solvency
14. (TCO G) To calculate the market value of a bond, we need to _____. (Points : 5)
find out the present value of all of the future cash payments promised by the bond
calculate the present value of the principal only
calculate the present value of the interest only
multiply the bond price by the interest rate

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